Acampora: Pre-War Jitters

Ralph Acampora is among the financial world's most respected
technical analysts. In a special report entitled Pre-War Jitters, the
director of Technical Analysis for Prudential Securities offers an intriguing
comparison between market activity today and the days leading into the Gulf War
in 1991. Here's his current outlook.

"We would like to
highlight a comparison of recent market trading with the days leading up to the
Gulf War in 1991. Note the chart of the Dow Jones Industrial average for the
period immediately before the Gulf War and a few months after. There are several
similarities: First, the enemy is the same—Iraq. Second, the market made its
pre-war low in October. Third, there was a noticeable rally from October to
December. And fourth, the December peak led into a scary pre-war decline that
lasted eight trading days.

"The percentage moves
during the pre-war rally and the scary pre-war decline are not exactly the same
as today’s moves but they do provide us with a sense of the volatility that
surrounded this nervous period. Once the enemy is confronted (either militarily
or if they decide to leave peacefully) we should experience an exuberant rally.
The extent and duration of that potential rally depends upon the ability to
remove the old Iraqi regime with limited damage to us and to our allies. In the
meantime, we believe that the recent breakdowns are a harbinger of further near
term weakness but, like the pre-Gulf War market, we do not expect new lows. For
those who are very short term oriented this could be a difficult period. But for
those who are longer term oriented, this should be used as a buying
opportunity."